Shopify Inc. (SHOP) proved itself a force to be reckoned with during the pandemic’s early days. When businesses were frantically searching for a way to bolster their online presence and thus stay open, the ecommerce platform stepped in.
Now, with pandemic restrictions retracting in much of the world, Shopify’s contribution to the global landscape seems somewhat reduced. However, Shopify may have a plan here, and it focuses on one of the biggest new potential investment tools around: non-fungible tokens (NFTs).
I am bullish on Shopify. Though its price per share is out of range for many retail investors, the company’s potential to improve from here is sound.
The last 12-months for Shopify featured steadily mounting gains from March 2021 to November. However, the arrival of the Omicron variant of COVID-19 sent Shopify heading rapidly downward with the rest of tech, despite the company’s pandemic benefactor position.
Shopify lost over half its value in the following period between November 2021 and March 2022.
Although, the latest news might help Shopify perk back up. Reports note that Shopify’s NFT software suite is currently in beta. In turn, that suggests a release could be imminent. Shopify is poised to offer both NFT minting and selling tools, which would allow users to both create and post their own NFTs for sale, thus getting in on the heavy investment volumes in a relatively early manner.
Wall Street’s Take
Turning to Wall Street, Shopify has a Moderate Buy consensus rating. That’s based on 13 Buy and 14 Hold ratings assigned in the past three months. The average Shopify price target of $988.63 implies 64.54% upside potential. Moreover, SHOP’s analyst price targets range from a low of $800 to a high of $1,500 per share.
Shopify’s Valuation at Bargain Price
Shopify’s current share price, which is currently $600.84 a piece, will likely frighten off most smaller investors. However, don’t the high price scare you. There’s a lot of upside value potential in this stock thanks to its latest move and what we’ve already seen from the company.
Sure, Shopify’s huge expansion and speculative days may be behind it, as most companies have made their migration to an online space back during the pandemic’s earlier days. When it became a necessity to operate online, Shopify allowed that to happen for many smaller businesses.
Shopify’s earnings report showed a company starting to decline. It’s been tracking downward since last November, and the growth projections for 2022 are significantly lower than those seen for 2021. Granted, comparisons are particularly difficult these days.
2021 was unique in that it still had many of 2020’s restrictions in play, but not all of them. People were able to get out and go shopping again, but many were left concerned about doing so. Physical retail started a sputtering recovery, and most of those who wanted to make the jump online already had. That left fewer places for Shopify to grow into and resulted, at least partially, in the declining projections.
It doesn’t help that Shopify is facing declining interest from both hedge funds and insiders. Insiders sold over $51 million in stock in the last three months. Hedge funds dropped 229,100 shares in that same time frame.
It’s worth noting here that Cathie Wood’s Ark fund bought Shopify to the tune of over $9 million earlier this week. Additionally, Shopify has yet to announce any dividends for shareholders, and thus investors must place their bets entirely on growth.
However, that’s a plus for Shopify right now. As pricey as Shopify shares are, the share price is not only well under the average, it’s also significantly under the lowest targets. The current share price is nearly a third of the highest targets as well. While reaching the highest target is a forlorn hope right now, even reaching the lowest target represents nearly a 20% gain.
Shopify’s increasing push to get in on NFTs may or may not pan out. However, even without a major boost from NFTs, Shopify is still sufficiently solid to generate this kind of share price increases on its own.
Concluding Views
Shopify will undoubtedly scare off many retail investors. However, there’s still quite a bit of room for growth with Shopify. True, the accelerated digital migration inspired by the pandemic has already taken place, but this is why Shopify is already looking for new ways to monetize its platform.
The company’s share price has been in decline for months now. That raises a potential opportunity for investors to get back in for any new gains. NFTs may not be the best star to hitch a wagon to, but the market’s growth over the last few months suggests a possibility afoot.
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